How To Calculate Accounts Receivable Turnover in Dynamics365 | Arithmix

Calculating accounts receivable turnover is an important aspect of managing your business's finances. It helps you understand how quickly your customers are paying their bills and how efficiently you are managing your accounts receivable. In this article, we will discuss what accounts receivable turnover is and when it is valuable to calculate it. We will also provide a step-by-step guide on how to calculate accounts receivable turnover.

What Is Accounts Receivable Turnover?

Accounts receivable turnover is a financial ratio that measures how many times a company collects its average accounts receivable balance during a specific period. It is calculated by dividing the net credit sales by the average accounts receivable balance. The net credit sales are the total sales made on credit minus any returns or allowances. The average accounts receivable balance is the sum of the beginning and ending accounts receivable balance divided by two.

For example, if a company has net credit sales of $1,000,000 and an average accounts receivable balance of $200,000, its accounts receivable turnover ratio would be 5. This means that the company collects its average accounts receivable balance five times during the period.

When Is It Valuable To Calculate Accounts Receivable Turnover?

Calculating accounts receivable turnover is valuable for several reasons. First, it helps you understand how quickly your customers are paying their bills. If your accounts receivable turnover ratio is low, it may indicate that your customers are taking too long to pay their bills, which can negatively impact your cash flow. On the other hand, if your accounts receivable turnover ratio is high, it may indicate that you are managing your accounts receivable efficiently and collecting payments quickly.

Second, calculating accounts receivable turnover can help you identify potential issues with your credit policies. If your accounts receivable turnover ratio is low, it may indicate that you are extending credit to customers who are not able to pay their bills on time. This can lead to bad debt and financial losses. By analyzing your accounts receivable turnover ratio, you can adjust your credit policies to ensure that you are extending credit to customers who are likely to pay their bills on time.

How To Calculate Accounts Receivable Turnover

Calculating accounts receivable turnover is a simple process that involves two steps:

1. Calculate the net credit sales by subtracting any returns or allowances from the total sales made on credit.
2. Calculate the average accounts receivable balance by adding the beginning and ending accounts receivable balance and dividing by two.

Once you have these two numbers, you can divide the net credit sales by the average accounts receivable balance to get your accounts receivable turnover ratio.

It is important to note that accounts receivable turnover should be calculated for a specific period, such as a month, quarter, or year. This will allow you to track changes in your accounts receivable turnover ratio over time and identify trends.

In conclusion, calculating accounts receivable turnover is an important aspect of managing your business's finances. It helps you understand how quickly your customers are paying their bills and how efficiently you are managing your accounts receivable. By following the steps outlined in this article, you can easily calculate your accounts receivable turnover ratio and use it to make informed financial decisions for your business.

How Do You Calculate Accounts Receivable Turnover in Dynamics365

Dynamics365 itself isn’t naturally geared towards letting you calculate complex metrics like Accounts Receivable Turnover. As an alternative, teams typically use products like Arithmix to import data from Dynamics365 and build out dashboards.

What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like Dynamics365, combine it with data from other systems, and create calculations like Accounts Receivable Turnover.

In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.

Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.

Calculating Accounts Receivable Turnover in Arithmix

Calculating metrics like Accounts Receivable Turnover is simple in Arithmix. Once you've created your free account, you’ll be able to import your Dynamics365 data, and use it to create natural language formulas for metrics like Accounts Receivable Turnover.

Arithmix is designed to give you the power to build any calculations you want on top of your Dynamics365 data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.